There are a host of differences between the automobile markets in developed countries and that of countries like India. According to Mr. Patrik Riese – Managing Director and CEO of Volkswagen Finance Pvt. Ltd. (Volkswagen Financial Services), the changes are fundamental, in the sense that they completely change the way car financing products are approached.
Mr. Riese said, “India is a special market… the automobile market is still maturing, which means there is a huge potential here.” Speaking about how the Indian car market measures up against global markets, here is what he had to say:
A Perspective on the Indian Markets
India is the world’s largest market for two-wheelers. Almost everybody owns one. The passenger car market is still growing here; this also makes it a high potential market for cars. There is a certain pride of ownership about cars that is unique to developing countries. The same is true for India. A lot of motorcycle owners want to graduate to owning a car. While India’s huge potential for growth in the automobile segment is evident, the infrastructure needs to keep pace with it. The growth in infrastructure is steady, but it still needs to catch up with the volumes of cars being sold.
Next Step for the Indian Car Market
Once you get past the pride of ownership aspect of a vehicle, the automobile market, like in many mature markets, becomes more about needing transportation and less about needing a car. There is a perceptible shift from ownership to usage. The same trend is visible in India as well. As the market matures, services like ride-hailing and car share have gained popularity. This will also indicate a shift in the car financing industry, as the target changes, from financing cars for individuals to financing cars for companies.
The Next Big Thing for the Automobile Industry
Electric Cars - We are on the verge of some significant changes in the automobile industry. There has been a marked shift towards developing electric cars. These vehicles will go on to fundamentally change the face of the automobile industry. Electric cars have fewer moving parts and need considerably less service. Developing this technology, the batteries and the infrastructure, however, may pose a challenge for some markets.
Some parts of the world are better equipped today for electric cars than others. Sweden, for example, has electric outlets almost everywhere. These are required to heat car engines when it gets too cold for the car to start. These outlets can be adapted to charge the electric vehicles as well. But this shift from combustible engines to electric engines may be more difficult in other, especially developing, areas of the world.
Another big revolution is the self-driving car. But once again, as mentioned before, it faces stiff infrastructure requirements. Self-driving cars can be far safer than people driven vehicles, considering there are so many cameras and sensors on it. This, although, is entirely dependent on whether the traffic around the car is predictable or not. While this technology is a long way off for a country like India, it is still a very interesting development.
Car Financing in the Indian Context
Almost 70% of all cars purchased in India are financed. There are steps that need to be taken, however, to grow this number further. There needs to be a stronger financial infrastructure for starters. There needs to be a sound means to validate credit history, validate income, and more importantly, there needs to be a greater access to data. Case in point, Volkswagen Financial Services has a product unique to India called, ‘No-Income Proof Financing’, wherein none of the above-mentioned documents are needed to get car finance.
In a nutshell, India has made enormous strides towards competing with global automotive markets, and is gradually becoming one of the biggest automotive markets in the world. There, however, need to be strong measures put in place to further consolidate this position and help make India more receptive to the rapid changes happening in the global automobile industry.